Phase I Environmental Site Assessment: What California Commercial Buyers Need to Know

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

A Phase I environmental site assessment (ESA) is a records review, site visit and interview process that looks for evidence that hazardous substances or petroleum have been released on a property. It does not normally include soil or groundwater sampling; that is a Phase II. Buyers order a Phase I done to ASTM E1527-21 because EPA recognizes that standard as meeting its All Appropriate Inquiries (AAI) rule, which is a condition of key federal landowner liability protections, and because most commercial lenders ask for one.

This guide explains what a Phase I covers, the timing rules, how to check California’s own cleanup databases, when a Phase II follows, and how environmental review plays out on vineyards, wineries and fuel-station sites in the counties we serve.

Why buyers order a Phase I

Under the federal Superfund law (CERCLA), a current owner can be liable for contamination it did not cause. EPA’s All Appropriate Inquiries page explains that to claim protection as an innocent landowner, contiguous property owner or bona fide prospective purchaser, a buyer must conduct all appropriate inquiries before acquiring the property and meet continuing obligations afterward. The AAI rule is at 40 CFR Part 312.

EPA says ASTM E1527-21 (commercial property) and ASTM E2247-23 (forestland or rural property) are consistent with the AAI rule and can be used to satisfy it. ASTM describes E1527-21 as defining good commercial and customary practice for assessing CERCLA hazardous substances and petroleum products at commercial real estate. Its central output is a list of recognized environmental conditions (RECs): the presence or likely presence of hazardous substances or petroleum due to a release, or under conditions that pose a material threat of a future release, excluding de minimis conditions.

The second reason is practical: lenders. Commercial lenders set their own environmental policies, and SBA lenders follow the environmental requirements in SBA’s SOP 50 10, which SBA updated with technical changes effective October 1, 2026. Ask your lender early which level of review it needs for your property type.

What a Phase I includes

A Phase I to ASTM E1527-21 is built around the AAI components. Under 40 CFR 312.20, these include:

• Interviews with past and present owners, operators and occupants.
• Searches for recorded environmental cleanup liens.
• Government records review, federal, tribal, state and local.
• Visual inspection of the property and adjoining properties.
• Historical sources, typically aerial photographs, fire insurance maps, city directories and building permits, to trace prior uses.
• The environmental professional’s declaration.

The buyer has duties too. Expect a user questionnaire asking about your knowledge of liens, specialized knowledge, and whether the price reflects any known contamination.

What a standard Phase I does not cover. ASTM lists non-scope considerations that are outside the standard unless you add them. Building-material and indoor issues that buyers often ask about, such as asbestos, lead-based paint, radon and mold, are commonly handled as separate add-on scopes; ask your consultant to list in the proposal exactly which add-ons are included.

Timing: the one-year and 180-day rules

A Phase I has a shelf life for AAI purposes.

A seller’s Phase I from two years ago is useful background, but it will not, by itself, satisfy AAI for your purchase. If escrow drags past 180 days from the report’s component dates, ask the consultant for an update before closing. Many lenders also want to be named in a reliance letter.

California database lookups you can run yourself

Before you spend money on a consultant, check the state’s two main public cleanup databases. CalEPA’s Cortese List page identifies them as sources for California’s list of hazardous materials sites under Government Code section 65962.5.

• DTSC EnviroStor (envirostor.dtsc.ca.gov). Run by the Department of Toxic Substances Control. Its public data description lists cleanup sites where DTSC oversees investigation and cleanup, permitted hazardous waste facilities that treat, store or dispose of waste, and inspection and enforcement sites.
• State Water Board GeoTracker (geotracker.waterboards.ca.gov). CalEPA identifies it as the source for leaking underground storage tank sites; it also holds other regional water board cleanup cases and the electronic reports consultants upload.

Search by address and look at the map around the parcel, not just the parcel itself. A closed fuel-leak case next door or an open solvent case up-gradient can show up as a REC or a vapor-migration concern in your Phase I. Read the case documents, not just the status line: a "closed" case may have land-use restrictions.

Seller disclosure in California

California adds a disclosure rule for nonresidential property. Under Health and Safety Code section 78700, an owner of nonresidential real property who knows, or has reasonable cause to believe, that a release of hazardous substances is on or under the property must give written notice to the buyer, lessee or renter before the sale, lease or rental. An owner who knowingly and willfully fails to notify of a release of a material amount can face a civil penalty of up to $5,000 per violation, on top of actual damages. Ask for the seller’s prior environmental reports in your initial document request, and do not treat silence as clearance.

When a Phase II follows

If the Phase I identifies RECs or significant data gaps, the next step is usually a Phase II ESA, which samples soil, soil vapor or groundwater. ASTM’s E1903-19 practice describes a Phase II as an iterative investigation to produce objective, defensible data on whether substances are present at known or suspected release areas, often following up on RECs from a Phase I.

What to plan for in the purchase agreement:

• Time. Sampling, lab work and report writing can take longer than a standard due diligence period. Negotiate an extension right tied to Phase I findings.
• Access. Get written permission for drilling, utility clearance and restoration, and decide who receives the data.
• Outcomes. A Phase II may come back clean, lead to a price or credit negotiation, require a seller cleanup before closing, or justify cancelling. If a cleanup involves a regulator, your attorney will want to understand the oversight agency and any closure conditions.

Our commercial due diligence checklist shows where Phase I and Phase II fit with title, zoning and lease review.

Property-type examples

These are general examples of what consultants look for, not findings about any particular property.

Vineyards and agricultural land. Phase I work on farmland typically focuses on historical pesticide use, fuel and chemical storage near shop and equipment yards, and old above- or below-ground tanks. Rural parcels may be assessed under ASTM E2247-23 when they are forestland or rural property, which EPA also recognizes. See our guides to vineyard due diligence and environmental constraints on vineyard land.

Wineries. Expect the consultant to look at process wastewater handling, chemical and fuel storage, and any on-site tanks, along with permits. Our winery due diligence checklist and winery wastewater guide cover the permitting side.

Gas stations and former fuel sites. Underground storage tanks (USTs) drive the review. The State Water Board’s UST program explains that local Certified Unified Program Agencies (CUPAs) implement leak-prevention requirements such as installation, testing, leak detection and overfill protection, and that single-walled USTs had to be permanently closed by December 31, 2025. On a station purchase, ask for the CUPA permit and inspection file, tank testing records, GeoTracker case history and any UST Cleanup Fund claim. Retail and office buyers should also check for former stations on or next to their parcel; see our guides to retail space for sale and industrial and warehouse space.

Questions people ask

What is the difference between a Phase I and a Phase II?

A Phase I is a records, interview and site-visit review with no sampling. A Phase II collects and tests soil, vapor or groundwater to investigate conditions the Phase I flagged.

What standard should my Phase I follow?

For commercial property, ASTM E1527-21, which EPA recognizes as consistent with the AAI rule. EPA also recognizes ASTM E2247-23 for forestland or rural property.

How old can a Phase I be at closing?

Under 40 CFR 312.20, the inquiry must be within one year before acquisition, and interviews, lien search, records review, site visit and the environmental professional’s declaration must be within 180 days.

Can I use the seller’s Phase I?

Only as background unless it is updated. You can reuse a prior inquiry if it falls within the one-year window and the 180-day components are updated for you. Your lender may also require its own report or a reliance letter.

How do I check a property’s environmental history myself?

Search the address in DTSC’s EnviroStor and the State Water Board’s GeoTracker, and look at neighboring parcels on the map.

Does a California seller have to tell me about contamination?

Yes, for nonresidential property, if the owner knows or has reasonable cause to believe a release is on or under the property. Health and Safety Code section 78700 requires written notice before the sale or lease.

Will my SBA lender require a Phase I?

It depends on the property and business type. SBA’s SOP 50 10 sets the environmental requirements SBA lenders apply; ask your lender which level of review your deal needs.

Sources & notes

1. U.S. EPA, Brownfields All Appropriate Inquiries.
2. AAI timing, 40 CFR 312.20 (Cornell LII copy of the federal regulation).
3. ASTM, E1527-21 scope and E1903-19 scope. Full standards are sold by ASTM.
4. CalEPA, Cortese List data resources.
5. California Open Data, DTSC EnviroStor public data export; search tools at EnviroStor and GeoTracker.
6. State Water Resources Control Board, Underground Storage Tank Program and UST Cleanup Fund.
7. Health and Safety Code section 78700; official text on leginfo.
8. U.S. Small Business Administration, SOP 50 10 (version 8.1 with technical updates effective October 1, 2026). We did not summarize its environmental chapter here; confirm requirements with your lender.

General information, not legal, tax or lending advice. An environmental professional and your attorney should scope and interpret any assessment. Updated November 2026. Primary sources are linked in this guide.

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